The country’s balance of payments for the first quarter of the 2024-25 financial year has been revised down by four per cent to Nu 12.5bn, primarily due to a growing trade deficit driven by rising imports. The balance of payments measures the net flow of money into and out of the country over a given period. Despite this revision, the finance ministry’s latest macroeconomic situation report indicates that the overall balance for the financial year is expected to improve compared to last year’s deficit of nearly Nu 250 M.
Projections for the medium term are positive due to the expected increase in foreign grants and loans.
The country’s gross international reserves are projected to reach USD 783 M by the end of the current financial year, enough to cover 20 months of essential imports during critical periods.
According to the finance ministry, the reserves are expected to improve further in the medium term.
However, the increase is largely attributed to reliance on loans and grants rather than improvements in economic efficiency or productivity.
Reliance on loans and grants is one of the key structural issues hampering Bhutan’s economy.
Meanwhile, the current account deficit, which reflects the gap between money spent on imports and earned from exports and services, is projected to rise by seven per cent in the first quarter of the current financial year, reaching almost 60 billion (59.97) ngultrum.
This is driven by a 10 per cent increase in the trade deficit, largely due to higher goods imports, with 96 per cent of the deficit linked to trade with India.
However, improvements in exports, services, and grants under the 13th Five-Year Plan are expected to reduce the deficit in the next financial year.
On the other hand, the capital account, which tracks the money coming in for long-term projects, is expected to increase to over Nu 18bn this financial year. A rise of nearly 130 per cent from the previous financial year.
This significant increase is primarily due to higher grants from India.
Kinley Bidha
Edited by Sherub Dorji
